By Ethan C. Nobles

Arkansas Realtors® Association ● This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

            The National Association of Realtors® has been pushing for Federal Housing Administration modernization for quite some time and it appears that reform may be on the horizon.

            On Dec. 14, the U.S. Senate passed S. 2338 – the FHA Modernization Act of 2007. That bill is designed to give homebuyers an alternative to riskier mortgages and to provide some relief to borrowers facing foreclosure.

            One can’t help but think the bill is a fine idea, considering the problems associated with the subprime mortgage market that surfaced this year. While we haven’t seen the skyrocketing foreclosure rates in Arkansas that have plagued the rest of the nation, they are still a concern.

            According to data from Moody’s, less than 1.4 percent of homeowners defaulted on their first mortgages in the third quarter in central Arkansas. When you combine that fact with a Moody’s report showing homes are retaining their value in Arkansas and the economy is still expanding here in the Natural State, that all adds up to a comparatively stable housing market.

            Truth be told, FHA reform is long overdue – a fact that has become apparent as the subprime mortgage market has all but dried up this year. Here in Arkansas, of course, there has been an alternative for some time to subprime loans through the Arkansas Development Finance Authority’s HomeToOwn program.

            That program offers very low interest rates and, in some cases, down payment assistance to people who may have trouble securing a conventional, 30-year mortgage. The FHA reforms, if passed, will provide avenue for people needing a loan but struggling with the requirements of a conventional mortgage.

            Some of the features of the FHS legislation serve to increase loan limits and cut down on the statutory 3 percent minimum cash down payment. The increase in FHA mortgage loan limits would help first-time home buyers, minority buyers and people who don’t qualify for conventional mortgages. Also, the increased loan limits would help people living in high cost areas where current limits make the FHA program virtually unusable.

            Keep in mind that people qualifying for an FHA loan also get a very good interest rate on their mortgages – a feature almost entirely lacking in the subprime mortgage market. The expansion of the FHA program will, hopefully, help more people secure affordable mortgages. That could go a long way toward resolving problems that were inherent with subprime mortgages.

            Another feature of the bill is set up to help borrowers facing foreclosure. The new legislation, if passed, will give the FHA the authority to step in and reset certain adjustable rate mortgages in an attempt to help borrowers avoid foreclosure.

            After hearing of problems associated with some of the more exotic mortgages that were being advanced as early as last year attempts to reform the FHA is certainly good news.

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House to House is distributed weekly by the Arkansas Realtors® Association